The central authorities recently urged governments of various levels to take necessary measures to prompt industries to strengthen self-discipline and prevent vicious “involutionary” competition.
“Involutionary” competition refers to the fierce competition among companies for limited resources. This competition forces all parties to make more efforts, but may ultimately lead to increased overall pressure and reduced efficiency. Such competition does not result in growth in productivity or a more advanced economic model. Without significant breakthroughs, society spirals into a state of internal friction, with increased complexity but not expansion.
The authorities need to provide an institutional solution.
In the past few years, price wars and verbal wars in some industries have repeatedly become the focus of public opinion. For example, in the new energy vehicle industry, many car company executives have publicly called for an end to “involutionary” competition. In the absence of innovation and increasingly serious product homogeneity, if enterprises only have the lowest price card to play, it is not conducive to the long-term development of the industry.
Fundamentally, the reason why the “involutionary” competition is intensifying in some industries is because the cake is limited.
If the market demand lacks growth and there are not many options left for enterprises, then it is highly likely that they will turn to vicious competition at a low level. From this perspective, only by promoting industrial upgrading, strengthening emerging industries and future industries, continuously expanding the pie, and cultivating a large number of gazelle and unicorn enterprises can the problem of “involutionary” competition be fundamentally solved.
It is innovation that makes the pie bigger. How to more reasonably balance the allocation of factor resource endowments in terms of market access, factor acquisition, government procurement, bidding, rewards and subsidies, how to allow market players to let go more calmly, and how to avoid the industry from passively falling into the vicious cycle of the bad driving out the good are all important issues related to building an innovation ecosystem.
The authorities should ensure that all types of business entities can use production factors equally and participate in market competition fairly in accordance with the law, so that all enterprises stand on the same starting line and turn more energy to product innovation and management reform, rather than falling into vicious competition of “killing one thousand enemies and hurting eight hundred of oneself”.
It is thus necessary to cultivate nutritious soil so that all market entities can thrive. The key to curbing “involutionary” competition, therefore, is to promote the transformation and upgrading of traditional industries and promoting high-level scientific and technological self-reliance.